Opendoor Avoids Nasdaq Delisting, Cancels Reverse Stock Split

Opendoor Technologies' stock surged after the company announced that it secured compliance with Nasdaq's rules and canceled a contentious reverse stock split. The move came after months of uncertainty over whether the company would remain listed on the exchange. Opendoor's stock had been flirting dangerously close to the $1 threshold, but managed to stay above it for the minimum consecutive trading days required by Nasdaq rules, avoiding delisting.

Opendoor Technologies Inc. (OPEN) saw its stock price surge significantly in premarket trading on Friday, July 2, after the company announced it had secured compliance with Nasdaq's listing requirements. This news came after months of uncertainty regarding the company's future on the exchange, as its stock had been dangerously close to the $1 threshold.

The company had been in danger of being delisted due to its stock price falling below $1 per share for consecutive trading days. However, Opendoor Technologies managed to stay above the $1 threshold for the required 10 consecutive trading days, thus avoiding delisting. This compliance with Nasdaq's rules led to a significant increase in the stock price, with shares surging double digits in premarket trading.

The announcement also included the cancellation of a special meeting of shareholders that had been postponed. This meeting would have sought approval for a reverse stock split, which would have pushed the nominal value of the stock price higher. The cancellation of this meeting can be seen as a vote of confidence from management that the stock will not return to trading below $1.

The core reason behind the stock's surge is the increase in demand, with much of the exposure gained through the options market. Retail traders have been attracted to the stock due to its lower cost of call options, especially when the nominal stock price is lower. The cancellation of the reverse stock split means that the cost of call options will remain optically lower in dollar terms than it would have been in the event of a reverse share split.

Opendoor Technologies is set to release its second-quarter earnings after the market close on August 5. Analysts expect revenue to remain flat year-over-year at $1.50 billion for the quarter, with a contribution profit projected between $65 million and $75 million. However, the company has historically experienced high volatility following earnings reports, with more frequent sell-offs than gains.

The stock's recent surge can be attributed to meme-stock momentum, with the stock price increasing by more than 280% over the past month. Despite this surge, the stock remains down 12.5% over the past year. The company's forward price-to-sales ratio of 0.3 suggests that the stock trades at just 30% of expected annual sales, making it attractive to speculative traders.

The cancellation of the reverse stock split vote and the company's compliance with Nasdaq's rules have provided a much-needed boost to the stock price. However, the company still faces significant challenges, including high volatility and the need to deliver on earnings expectations to sustain the current momentum.

References:
[1] https://sherwood.news/markets/opendoor-surges-on-decision-to-forgo-reverse-stock-split/
[2] https://moneycheck.com/opendoor-open-stock-can-earnings-live-up-to-a-280-monthly-surge/